IRS Proposes Rules for Determining Comparable Contributions to HSAs

By Carol A. Weiser, George H. Bostick, Adam B. Cohen, Ian A. Herbert, Carol T. McClarnon, Alice Murtos, Robert J. Neis, W. Mark Smith, William J. Walderman, Brendan M. Wilson and Walter H. Wingfield

Originally published August 31, 2005

The IRS has proposed regulations describing the rules that must be met for employer contributions to eligible employees’ health savings accounts (HSAs) to be treated as comparable. Under Internal Revenue Code section 4980G, if an employer makes contributions to employees’ HSAs that are not comparable, the employer is subject to an excise tax. However, the comparability rules do not apply to contributions made through a cafeteria plan. The proposed rules clarify and expand upon the comparability rules in IRS Notice 2004-2 and 2004-50. The regulations, which were issued on August 26, 2005, are proposed to be effective when published in final form, but may be relied upon in the interim.